Social Impact Bond Creates Housing in Denver

By Sonia Christensen

Denver’s social impact bond program will help finance new housing for people experiencing homelessness—and may end up saving the city some money too.

 

In February 2016, a new housing development opened its doors. New housing developments are not an unusual sight in Denver, but this one, Renaissance at North Colorado Station, had something different—103 units designated to house individuals who are either currently homeless, have previously been homeless, or would be homeless if not for this opportunity.

Renaissance at North Colorado Station was the first project to break ground in connection with Denver’s social impact bond program, which was officially launched earlier this year. According to the Corporation for Supportive Housing (CSH), a social impact bond is an initiative to measurably improve the lives of people most in need by driving resources toward better, more effective programs. Social impact bonds have been used to fund several different types of social programs, such as a project in South Carolina that focuses on the health of babies and mothers in poverty, or a project in Connecticut that gives aid to families struggling with substance abuse. In Denver, the funds collected for this initiative will be used to provide housing and supportive case management services to at least 250 of the city’s chronically homeless. 

Social impact bonds are privately funded, which means that those who invest in the program stand to make a profit if the program succeeds—and to see no return on investment if the project fails. Success in this project means the city saves money. The particular chronically homeless population being housed tend to be high utilizers of emergency services, like jail, courts, and hospitals. By creating housing for this population, the city expects to reduce the amount of services that they use, and save enough money to pay back investors. Total private investment is expected to be $8.7 million, with an additional $15 million coming from federal resources.

Success will be measured by The Urban Institute, an organization based in Washington, D.C., that conducts economic and social policy research. Success will be based on whether or not this program increases housing stability and decreases utilization of those high-cost public services. According to CSH, based on a study of jail bed reduction and housing stability in New York City, a 35-40% reduction in jail bed days and 83% housing stability among the target population would result in a payment near $9.5 million.

“It’s pretty simple. It’s about keeping this population out of jail,” Councilman Albus Brooks said. “If they don’t return to jail and they stay in the housing, then that’s a successful model.”

Brooks has been working on this project for four years, and though the private funding for the project has drawn media attention and some opposition in the city council, he sees this model as simply a way to find money that otherwise would not be available for social projects like these. 

“There’s been some media attention on making money off the backs of people. That’s not the point at all. The point is finding some complex financial structures that are outside of our city structure, which has finite resources,” said Brooks.

In fact, Brooks said that many of the private donors to this program—which include The Denver Foundation, Nonprofit Finance Fund, and The Colorado Health Foundation—are planning to donate back any profit they receive. “I wouldn’t call it a social impact bond. It’s a social investment,” Brooks said. 

In the opinion of Cathy Alderman, vice president of communications and public policy for Colorado Coalition for the Homeless (CCH), the benefits outweigh any implication of impropriety. “We really have to rely on our private partnerships sometimes,” she said.

 CCH is one of two organizations using funds received through this initiative to build and run these housing developments, the other being Mental Health Center of Denver. CCH is involved in Renaissance at North Colorado Station, and is opening another development, Renaissance Downtown Lofts, which will include 101 units. CCH will also provide onsite case managers for supportive services, which include access to health care, access to mental health care, some vocational training, and support in accessing benefits. “Really just helping people acquire the skills they need to stay in stable housing,” Alderman said. 

So far, there are 31 individuals in housing and 15 are awaiting approval. According to Alderman, one of the biggest initial challenges CCH faced was finding the individuals eligible for the program and getting the information out to them. Due to recent actions by the city—police sweeps and the breakup of encampments—many members of this population have been displaced from areas where they had previously connected with case managers. “We have outreach workers on the ground every day, talking to the people who unfortunately are forced to live on the streets and under bridges and in shelters and they build relationships with these folks,” Alderman said. “When these people are displaced or moved, then that relationship is severed and we have a more difficult time physically being able to connect and find them.”

Though success, in terms of money saved by the city and return on investment for the donors, will not be measured until 2021, Alderman already sees the program working. “I think that the fact that we’ve gotten 31 or so folks into housing is success. The second we knew that this bond was approved we started doing outreach the very next day. In about a month and half’s time we’ve been able to get people into housing.”

Success in terms of the effect this project will have on those moving into this new housing remains to be seen. So far, according to Alderman, the 31 that have moved in are adjusting to permanent housing, some of them for the first time. 

If the bond is deemed a success in 2021, both Brooks and Alderman see an opportunity for expansion. In that case, there will be efforts to seek more funding from the city and possibly the state, looking to address a wider population. ■